A former employee of a Boston-based biotech company and a friend of the company's CEO, whom the Securities and Exchange Commission have charged with stock manipulation and with making false statements and a scheme to defraud, have pleaded guilty in a parallel criminal case to charges of securities fraud and obstructing the SEC's investigation.

On September 7, 2018, Kenneth Stromsland, the former Vice President of Investor Relations for PixarBio Corporation, pleaded guilty to one count of securities fraud, relating to his manipulative trading in the company's stock, and one count of obstructing an agency proceeding, relating to his false testimony to the SEC during its 2017 investigation. Stromsland's false testimony included falsely denying that he had purchased shares of PixarBio to affect the company's share price and falsely denying that he had been instructed to do so by Frank Reynolds, PixarBio's then CEO. On February 7, 2019, Jay Herod, a friend of Reynolds, pleaded guilty to the same charges relating to similar conduct, including lying to the SEC about Reynolds directing his participation in the fraud.

In its civil case filed against PixarBio, Reynolds, Herod, and Stromsland, the SEC's complaint alleges, among other things, that Reynolds and Stromsland misled investors with false claims about PixarBio's progress in developing a purported method of delivering non-opiate, post-operative pain medication. The complaint also alleges that Reynolds, Stromsland, and Herod engaged in a fraudulent scheme to acquire and merge PixarBio with a publicly traded company and to secretly manipulate the sales of shares in the new entity. The SEC's litigation is pending and seeks permanent injunctions, disgorgement of ill-gotten gains with interest, penny stock bars, officer and director bars, and financial penalties.

For further information, see Litigation Release Nos. 24121 and 24146, and U.S. Department of Justice press releases relating to Stromsland and Herod.